Time to rethink Cattle Transaction Levy: Toohey

James Nason, 09/02/2015

A case has been made to replace the flat-rate Cattle Transaction Levy with a new percentage-based Value Added Levy, which would work in a similar way to the Goods and Services Tax (GST).

Justin Toohey

Justin Toohey

The idea has been put to Senators conducting an inquiry into agricultural levies by former Cattle Council of Australia chief executive officer Justin Toohey.

While Mr Toohey’s proposal is specific to the cattle industry, he says it could equally be applied to other agricultural products against which levies are charged.

In a written submission to the inquiry, Mr Toohey asks Senators to consider the idea of replacing the $5/head cattle transaction levy (CTL) with a percentage-based Value Added Levy (VAL), which he says would ensure a fairer result for all players throughout the supply chain.

‘A GST type levy would ensure a fairer result for all players throughout the supply chain’

Mr Toohey said a VAL would work in a similar way to the GST, with a percentage-based-levy applied only to the value added to cattle by each owner.

(Mr Toohey has initially nominated a VAL rate of 0.75pc as an example – more on how a VAL rate could be calculated below.)

The amount of VAL paid at each transaction would be determined by applying the VAL percentage rate to the difference between the price paid for an animal when purchased and the price received when sold. If the animal is sold for less than it was bought for, credit would be received. This is as the GST works.

By applying the levy as a VAL, the levy collection system would be removed from the Department of Agriculture’s Levies Management Unit and handled instead by the Australian Taxation Office. Cattle owners would file Business Activity Statements or Annual Income Statements recording prices paid for cattle bought (which would be zero for breeders) and prices received for cattle sold.

Mr Toohey said a VAL was one of several options considered for introduction before the existing CTL was adopted in 1991, and was seen at the time as the most equitable of the options presented and the cheapest to administer.

However, because a GST did not exist in Australia at the time, a VAL was considered too complicated. The CTL was chosen because it was more easily understood, and provided relatively predictable income for levy recipients.

In the subsequent years, however, the GST has become well understood, while several failings have since been identified with the CTL.

These include problems with the existing collection mechanism, the burdens it places on unpaid collection agents; accusations made to the recent Senate Committee Inquiry over downstream collectors falsifying levy figures and in turn MLA voting entitlements; high levy receipts caused by droughts driving higher numbers of transactions then slumps in receipts following widespread rain; and weaner producers paying a much higher percentage in levies when their animals’ values are low.

The current levy system also lacks transparency in terms of who pays the levy, how much each levy payer pays, and therefore who should have the say.

Advantages of a Value Added Levy

Mr Toohey said a VAL would provide many advantages.

These included a simpler collection system and more equity throughout the supply chain, because the levy would apply only to the value added by each levy payer.

Every cent of levy paid could also be recorded against a levy payer’s ABN or personal details. This would ensure that each individual’s and sector’s say in policy and development programs would be weighed exactly against their VAL contributions.

A VAL also amounts to an identical percentage of levy against every animal, and the provision of stable levy income for recipients as lower slaughterings are offset by higher prices and vice versa.

Management by the ATO would also remove the current burden on collection agents and the reliance on the Department of Agriculture’s Levies Management Unit to manage collection and distribution of levy monies.

“Whatever body is chosen or constructed to distribute the levy in the future (following implementation of changes stemming from the Senate review), its task will be made considerably easier under the VAL than the CTL because of the greater clarity of levy source,” Mr Toohey writes in his submission.

“This is made possible by the much more direct involvement of the ATO through the use of each levy payer’s Business Activity Statement or Annual Income Statement.

“Producer levies can be far more easily distinguished against lotfeeder levies, and therefore distributed more appropriately.

Processor levies will be far more clearly defined and will continue to be based on their cents-per-kilogram charge, with these moneys making their way specifically to the processing sector’s service company.

“Likewise, the livestock exporters would continue to pay their levies, collected under their own preferred system, to LiveCorp.”

How would a VAL rate be calculated?

Consider that a VAL is effectively being paid by the animal, not the custodian of the animal.

It is an odd concept, Mr Toohey concedes, but one that helps to gain an understanding of how the VAL is to be calculated and why the CTL is so inequitable.

Under the CTL, an animal that is traded five times, for example, has five levies charged against it; on the other hand, for an equivalent animal traded once (for slaughter), only one levy is paid. The latter animal attracts a levy charge of only 20pc that of the former.

Under a VAL, it doesn’t matter how often an animal is traded: the percentage charge against the value added to each animal accumulates through the animal’s life until, at the end, it totals the percentage at which the VAL has been set. It is evenly applied to each and every animal.

The level of the VAL is found by determining how much total levies are to be collected for industry throughout the year and dividing it by the total value of all cattle at slaughter.

Practically it would be calculated as follows (estimates only):

Total levy money currently collected under the CTL (A) $63m
Total cattle slaughtered (B) 8.5m
Average value of cattle at slaughter (C) $1,000
Total value of cattle slaughtered (D = B x C) $8.5b
Total levy required as percent of Total Value at Slaughter (E = A ÷ D) 0.75% approx


As the animals transition from birth to slaughter, a VAL is charged at each transaction point, just like with the GST. Because it is applied only to the value added by each owner (calculated by subtracting from the total sale price any moneys originally paid for the animals), the total levies collected for the entire life of the animals is equivalent to 0.75pc of their value at the time of slaughter.

Replacing the CTL with a VAL would address a number of transparency concerns raised by the Senate Committee and would remove the expense of collecting and submitting the CTL currently incurred by agents and the processing sector.

There are producers who will pay a little more in dollar terms under a VAL than under the CTL (and some who will pay less), but the percentage they will be paying will be identical to the percentage paid by all participants in the supply chain, and it would only apply to the value added to each animal by each owner.

To read Mr Toohey’s full submission to the Senate Inquiry, which includes several practical examples of how a VAL could work, click here


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  1. John Gunthorpe, 10/02/2015

    I understand the reason for trying to find a more equitable system for collecting the levies but the current problems are in their expenditure by MLA on marketing and R&D. Justin, CCA need to better control the spending of the $60 million per annum levies through your Memorandum of Understanding with MLA before seeking equity in their collection.

    Regarding your proposal, it may be asking too much of producers to allocate their costs to individual animals. I know NLIS tags help but when you are running large cattle properties with some trade and bred cattle it can be difficult to trace. Yes there is a need to value stock annually for tax purposes and an average could be applied but this is still considerably more work than paying a flat rate per head.

    Some states have implemented Biosecurity Funds and in Victoria they collect stamp duty on all cattle transaction for this purpose. This is capped at $5 per head and the duty is collected at 5 cents per $20 of transaction value. It is collected by the agents and processors and goes to the State Revenue Office who send it on to the Cattle Compensation Advisory Committee for distribution. If Queensland were to adopt a similar system they could fully compensate those producers who, through no fault of their own, are wearing the cost of the BJD eradication program introduced by the Newman Government. For the sake of those who ran up big debts feeding quarantined stock in times of drought, I trust the new government will see sense in this approach. Industry must pay fair compensation to these people.

    Perhaps a system such as this might be more equitable and easier to administer without asking the producer to spend more time at his or her desk.

  2. Fernando Mendoza, 10/02/2015

    In a very kind and honest way: ‘A list of who all the PICs holders are and how many cattle they have sold’ is not a sensible approach. I encourage you to look further into your suggestion.
    There is no mess collecting the GST and would not be any mess collecting VAL. At the end of the year, the total amout of money a business received for selling cattle is offset by the amount of money the business used to buy the cattle. At the end of the year you only paid VAL for the balance. Simple! Just like GST! I suggest you read a little bit more about the proposal.
    Of course, every systmen will have some limitations. The current one is far less than perfect. The VAL proposal is sensible, in particular since farmers are one of the most trusted members of the Australian community and always strive to do the right thing.

  3. Wallace Gunthorpe, 10/02/2015

    Well said Russell,you took the words out of my mouth.

  4. Russell Pearson, 09/02/2015

    Mr Toohey, obviously has no idea how the cattle industry works, imagine trying to work out the added value on a line of bullocks that are made up from various mobs that were purchased here. There and every where, plus a few home breds! Then leaving it to the Australian Tax Office to collect and distribute, what a mess! The present system may not be perfect but it does work and we are happy to keep supporting the industry this way.

  5. Phil Cook, 09/02/2015

    At Ken Leckie’s funeral in 2003 he was described as “long-sighted”. What an understatement. When he proposed this VAL system 20 years or more ago he was vilified and ridiculed by the forces of the “conventional wisdom” in the agripolitics. It was a simple and equitable system then …….. and nothing has changed.

  6. Edgar Burnett, 09/02/2015

    Sounds like more paper shuffling and unwarranted expense to me – something that would be dreamed up by a Bureaucrat and something that Producers have got plenty of at present. The present system is simple and would be informative if the appropriate Authority only had a list of who all of the PIC holders are and how many cattle they have sold.!

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